Extending its reach, expanding liability, and increasing the damages: a recent decision assessing the U.S. Defend Trade Secrets Act has major implications
06 May 2020
The U.S's Defend Trade Secrets Act ("DTSA") now extends to capture activities outside of the U.S. Recently, in Motorola Solutions, Inc. v. Hytera Communications Corp., No. 1:17-cv-1973 (N.D. Ill. Jan. 31, 2020), the Court held that an owner of a misappropriated trade secret can pursue damages under the DTSA for activities outside of the U.S as long as an act in furtherance of the misappropriation occurred in the U.S.
In this case, such "U.S acts" included the mere advertising or selling of the product embodying the misappropriated trade secrets in the U.S. This ruling has the impact of:
- broadening the geographic reach of the DTSA;
- increasing the scope of potential liability to activities that occur outside of the U.S; and
- expanding the possible damages claim to include worldwide sales.
Defendants, a Chinese manufacturer and its American subsidiaries, allegedly hired away three of Plaintiffs' engineers, who improperly took thousands of Plaintiffs' documents containing their trade secrets. The former engineers used those trade secrets to develop digital radios that Defendants then sold around the world, including in the U.S. Plaintiffs sued Defendants for, among other claims, trade secret misappropriation under the DTSA and the Illinois Trade Secret Act and sought damages stemming from the worldwide sales of the radios that were manufactured using the misappropriated trade secrets.
The Court held in Motorola that Plaintiffs could maintain a claim for extraterritorial damages under the DTSA. The Court's analysis was rooted in an interplay between the DTSA and the Economic Espionage Act of 1996 ("EEA"), which predates the DTSA and criminalizes the theft of trade secrets in certain contexts. The DTSA, which became effective in May 2016, amended sections of the EEA and created a private right of action for trade secret misappropriation. The Court reasoned that, like the EEA, the private right of action under the DTSA also applies extraterritorially under certain conditions, including when an act in furtherance of the trade secret misappropriation was committed in the U.S. The Court concluded that acts that may trigger that extraterritoriality effect include the advertising, promoting, and marketing at trade shows in the U.S of the products that embody the misappropriated trade secrets – in this case, the digital radios. Under this ruling, damages claims under the DTSA can potentially include worldwide sales as long as there were some advertisements in the U.S. It also may increase the scope of liability to include the misappropriation of trade secrets that were created, used, and taken outside of the US but were used to make products that were advertised in the U.S.
Our U.S IP colleagues are very familiar with the contours of the DTSA and can help clients better protect their valuable trade secrets and pursue action when they are improperly taken, as well as provide a vigorous defense when such claims are asserted against them.